This study is 1-year, randomized, double-blind, placebo-controlled trial to test the efficacy and safety of troglitazone 600 mg OD. Efficacy assessments will determine whether postprandial glucose and overall insulin sensitivity will be improved in patients with type 2 diabetes by initiating troglitazone therapy in the early stage of their diabetes. In 50% of the total number of patients randomized to study medication, beta-cell function will be assessed with a graded glucose infusion (GGI) preceded and followed by arginine stimulation and by FSIVGTT.